Do You Know What Your SMSF Can Pay For?

1. Do You Know What Your SMSF Can Pay For? Updated November 2014 Here is a helpful guide on what expenses your SMSF can legally pay, and tax deductions available to your SMSF that you may not be aware of. Whether it is common expenses such as accounting fees and establishment costs, or the more outlandish such as flights, accommodation, laptops and expensive software programs, the simplest way to work out if it is appropriate for your SMSF to pay a particular expense is to ask two questions: 1.Is the payment allowed under your trust deed and superannuation law? 2.Will the payment be tax deductible? What does superannuation law say? Any expense paid by your SMSF must relate directly to the running of your super fund. Always apply the sole purpose test, the requirement that any decision you make about your SMSF is made for the sole purpose of providing retirement benefits to members. Any expense that provides a current benefit to members should not be paid from your superfund. If the expense looks personal or excessive about the size of the fund, it is likely to get some extra attention. Other rules you need to know: •Your SMSF can’t provide loans or financial assistance to members of the fund or their relatives,

2. •Any payments between your super fund and yourself or your business must be done on commercial terms (arms-length), •Be very careful selling anything to your super fund that isn’t listed shares or business real property as strict rules apply, •You cannot pay yourself remuneration for your services as a Trustee of your SMSF. Check your trust deed too as there should be a clause setting out what expenses are acceptable. What can trustees be remunerated for? While you cannot pay yourself remuneration for your services as a Trustee you may be able to be remunerated for non-trustee services, provided: •You are appropriately qualified and licensed to perform the service(s); •The duties or services are performed as part of a business through which you provide the same services to the public; and •The remuneration is on an arm’s length basis. A common example of this is an accountant receiving remuneration for preparing the financial statements and tax return of the super fund in their normal course of business. Claiming those all-important tax deductions. There are times when an expense may be allowed to be paid by your super fund, but no tax deduction is available to the super fund eg: costs of establishing your super fund, or expenses incurred when the fund is in pension phase and paying 0% tax. In these situations, the fund should still pay the expense, but there will be little or no tax advantage. There is a tax ruling, TR 93/17 which contains a detailed list of expenses that are deductible to your SMSF including: •Actuarial costs, •Accountancy fees, •Audit fees, •Updating your trust deed to comply with SIS, •Trustee fees and premiums under an indemnity insurance policy, •Costs in connection with the calculation and payment of benefits to members e.g. interest on money borrowed to secure temporary finance for payment of benefits, medical costs in assessing invalidity claims, •Investment adviser fees, •Subscriptions for membership to ASFA, and •Other administrative costs incurred in managing the fund.

3. Expenses that are likely to be deductible include bank charges, brokerage, filing fees, fines, interest paid, life and TPD insurance premiums, valuation and storage costs, property expenses, relevant training courses, subscriptions, and administration software. Two of the most beneficial tax deductions available to SMSFs are: •Exempt current pension income deduction – available for funds paying pensions •Anti-detriment deduction – a very valuable deduction for any fund paying a death benefit How to stay out of trouble: •Make sure invoices are made out to the super fund, •Wherever possible pay the expense directly from the super fund bank account, •Watch paying expenses from your own bank account or company bank account as they could be deemed a loan to your fund or a contribution. Kindly visit https://www.ato.gov.au/Super/Self-managed-super-funds/ for new rules & updates. Visit for SMSF compliance & audit.